MPs seek full inquiry into City Hall grants scandal

Monday 14 January 2008 08:59 BST

Kate Hoey: Demanding an inquiry

A cross-party group of MPs from the capital has called for a full inquiry into the Mayor and his London Development Agency over allegations that cash was misappropriated by friends of Mr Livingstone's adviser Lee Jasper.

The MPs - one Labour, one Liberal Democrat, and one Conservative - accused the LDA of "misrepresenting" its own internal review into a number of suspect projects paid millions of pounds in public money.

They called for the District Auditor to step in. One of the mayor's most senior advisers, John Ross, today said the report would be passed to the auditor.

But MPs Kate Hoey, Lynne Featherstone, and Greg Hands, said the move did not go far enough and demanded a full-scale inquiry into every project caught up in the allegations.

The LDA has published its own internal review into suspect projects - but it mentions only six of the 13 identified by the Standard.

All 13, run by friends and business associates of Mr Jasper, have received large sums of LDA money but have little, if anything, to show for it. Several have failed to account for the money.

The total amount paid by City Hall to the 13 suspect organisations is at least £3.3 million.

John Ross, the Mayor's director of economic and business policy, said today: "The district auditor is completely independent, we have submitted a review to him.

"The district auditor could in fact have the perfectly legal power to step in at any time if he was not happy with the form of the inquiry, but it will go to him in any case."

Asked if the Mayor would open up all the documents so they could be examined by journalists, Mr Ross replied: "All matters that are legal we are in favour at being looked at, but it's for the district auditor to decide what can be looked at and who you can talk to.

"We have co-operated at all times with the district auditor and with journalists and we will continue to do so. I think it is more appropriate for the district auditor than three MPs to decide what is the best way to investigate allegations."

Ms Hoey is Labour MP for Vauxhall, while Mr Hands is Tory MP for Hammersmith and Fulham, and Ms Featherstone represents Hornsey and Wood Green for the Lib-Dems.

In a letter to the district auditor they said the LDA was "no longer credible" because of flaws in its investigation into the projects.

In press releases on Friday, the LDA and the Mayor claimed the review had concluded that allegations of impropriety were "unfounded." Mayoral press officers claimed Mr Jasper had been cleared. In fact, when the review was later published, it became clear that three of the projects were to be reported to the police.

A fourth is already under police investigation and a fifth may be referred to police subject to the outcome of an audit.

Only the press release was made available during working hours on Friday. The full text of the review was held back until after normal business hours.

The review, conducted by the LDA's director of resources and risk, Andrew Travers, also casts doubt on claims by Mr Livingstone that there were "full audit trails" on every project with "chapter and verse on how the money's been spent".

The three MPs said they were "greatly concerned" about the episode. "Given the LDA's public misrepresentation of its own review, we believe it can no longer be a credible investigator of these allegations," they said in the letter to the district auditor.

"We therefore ask you to take over the investigation and also to launch a wider investigation into the LDA and GLA's grant-giving procedure. We have written on this cross-party basis because we believe these matters are of an importance beyond party politics."

The review concluded that three of the six projects it mentions should be reported immediately to the police. They are:

Diversity International, run by a close friend of Mr Jasper's, Joel O'Loughlin. It received £346,000 to run a website for London business, even though it had no expertise in computers and was based in Liverpool before going into liquidation.

the European Federation of Black Women Business Owners, run by another friend of Mr Jasper's, Yvonne Thompson, who was also a member of the LDA board at the time. It was paid £36,900 by the LDA but its accounts, signed by Ms Thompson, show no trace of the money

the Deshbangla Foundation, in which another friend of Mr Jasper's, Kumar Murshid, declared an associated interest. It was paid £35,000 but has never filed any accounts.

The review said a fourth project, Brixton Base, could be referred to the police following the completion of an LDA audit.

Detectives are already investigating fraud allegations at a fifth project, the South London Green Badge Taxi School, run by close associates of Lee Jasper. It was not part of the review.

The MPs also expressed "severe doubts" about the thoroughness with which the LDA review searched for evidence of wrongdoing.

One of the allegations the review purportedly investigated related to Brenda Stern, an LDA official who lost her job after raising concerns about one of the suspect projects.

But she was never contacted and said today: "The schedule of allegations published with the review claims I never complained of losing my job for raising concerns about one of the projects.

"I most certainly did make that complaint and I am very surprised indeed that the LDA claims to have investigated this project without even trying to contact me."

In respect of the other projects, the review said it had found no evidence of fraud, corruption or collusion "to date" but that investigations would continue.

There were, however, "several instances" of "weaknesses in LDA project management and record-keeping" in respect of these projects, the review said.

The review's written findings contradict the claims of the LDA press release that the projects were cleared.

The findings also raise doubts about Mr Jasper, who told BBC London that he merely "advised" on LDA grants and did not get involved in operational matters.

The review said: "The Director of Policing and Equalities [Mr Jasper] has had engagement with the LDA on an operational level."

A spokesman for the Mayor said that "not one of the Evening Standard's allegations was proved" by the LDA review.